California Voters Asked to Triple Tobacco Tax

SACRAMENTO (CN) — After two statewide initiatives were defeated at the ballot box, anti-smoking activists, fed up with the Legislature’s inability to raise taxes, are asking California voters to approve a measure that would more than triple the tax on cigarettes. Since voters approved dramatic state tax increases on cigarettes in 1988 and again in 1998, California smoking rates have dropped, as has tobacco tax revenue. The activists hope to further stunt tobacco use and replenish tax revenue for California’s overburdened and struggling social healthcare system. The undying Californian tax debate has renewed itself in the form of Proposition 56, which asks voters to approve a $2 per pack tax hike and become just the fifth state to tax e-cigarettes. Golden State voters rejected tobacco tax increases in 2006 and 2012. The latest version has strong support from doctors’ groups, a billionaire activist, and legislative estimates that Proposition 56 could add more than a $1 billion a year to the state’s coffers. The Yes on 56 “Save Lives California” campaign says the proposition has been thoroughly vetted to ensure that the tax money will go to Medi-Cal and tobacco cessation programs, with yearly audits by the state auditor. It promises voters that politicians won’t be able to get their hands on most of the new revenue source. “This initiative protects our interests by prohibiting bureaucrats and politicians from using the funds raised through this tobacco tax for any other than those explicitly laid out in the proposition,” a Yes campaign fact sheet states. Supporters cite the measure’s focus on dropping teen smoking rates, noting studies showing that for every 10 percent increase in cigarette costs, teen use drops by nearly 7 percent. California once boasted one of the nation’s highest excise tobacco tax, but now ranks 37th on per pack state taxes. The average state tax is $1.65 per pack and the federal cigarette tax is $1.01. If voters approve Proposition 56, California’s excise tax would rise to $2.87 per pack, ninth highest in the nation. Unsurprisingly, the tobacco industry is throwing barrels of money against the measure. Donors have contributed more than $66 million, with major donations coming from tobacco conglomerate Altria, parent of Phillip Morris. Of all the interest groups involved with California’s 17 statewide November propositions, only the opponents of Proposition 61, a measure capping certain prescription drug prices, have raised more money than Big Tobacco. The heavily financed opponents of Proposition 56 are warning voters that the billions in new tobacco taxes won’t be directed to Medi-Cal and tobacco prevention programs, but to the pockets of insurance companies and hospital executives. The No campaign calls Proposition 56 a “special interest tax grab” and an unnecessary amendment to the California Constitution. “Only 13 percent of the new tobacco tax would actually help people quit or even keep kids from starting,” a No on Prop 56 advertisement claims.“Instead, most of the $1.4 billion created in new tax revenue each year goes directly to health insurance companies or other wealthy special interests to enrich themselves.” The tobacco interests accuse the healthcare industry of spending millions to get paid to treat “the very same Medi-Cal patients they already treat today.” “The wealthy special interests behind Prop. 56 are trying to use the ballot box to increase their profits,” No on 56 coalition spokeswoman Beth Miller said in a statement. “Proponents are arguing that Prop. 56 is designed to stop kids from smoking, but when you follow the money, it becomes clear that Prop. 56 is nothing more than a special interest tax grab.” The No campaign consists largely of California taxpayer associations, including the Howard Jarvis Taxpayers Association, which calls Proposition 56 “another effort to funnel more money into efforts overseen by government entities.” While the tobacco industry portrays Proposition 56 as a boon for hospital executives, supporters are touting the social benefits of raising tobacco taxes. They say it will also protect children who are being targeted with “candy-flavored electronic cigarettes.” Billionaire activist Tom Steyer has donated more than $9 million of the $28 million raised by Proposition 56 supporters. The state’s most powerful hospital union, the California Medical Association, is also backing the measure, along with the California Democratic Party. “With Big Tobacco using new tools like e-cigarettes to hook our kids on a lifelong addiction, it’s more important than ever that California take the lead and save lives by voting ‘Yes’ on Prop. 56,” Lt. Gov. Gavin Newsom said in a statement. A recent Field Poll indicates that 53 percent of likely voters surveyed said they will vote Yes on Proposition 56. The online poll of 943 voters found that younger and more educated voters favor raising tobacco taxes, with Democrats also in favor of Proposition 56.